An Asset Risk Theory of Share Tenancy

Reverse share tenancy, wherein poorer landlords rent out land to richer
tenants on shares, is a common phenomenon. Yet it does not fit existing
theoretical models of sharecropping and has never before been
modeled in the economics literature. We explain share tenancy contracts
using an asset risk model that incorporates Marshallian inefficiency
and thereby provides a credible explanation for share tenancy
more broadly, reverse tenancy included. When choosing the terms of
an agrarian contract, the landlord considers the impact of her choice
on the probability that she will retain future rights to the rented land.
Thus, this model captures the effect of tenure insecurity and property
rights on agrarian contracts. Among the main testable implications
of the theoretical model are that, as property rights become more secure,
reverse tenancy tends to disappear and that kin contracts tend
to make share tenancy more likely.